GEORGIA CONSTRUCTION, BOND & LIEN LAW BLOG


4 Types of Georgia Payment Bonds

Posted in Little Miller Act,Miller Act,Payment Bonds,Public Works Projects by Blue Blog on the March 19th, 2013

Georgia Public Works Payment Bond Claim

By:  Mark A. Cobb

Making a payment bond claim (i.e., a claim against the surety bond) in Georgia may be difficult unless you realize that there are four different types of payment bonds and that each type of payment bond has its own requirements and its own statutes of limitations.

Payment Bonds Help You Get Paid on Georgia Projects: The construction industry is very unique and offers its material suppliers and subcontractors tremendous advantages to make sure that they receive payment for their services, labor and supplies.  But, in order to avail yourself of these advantages, you must strictly comply with each of the requirements and deadlines necessary to enforce your claim.

The Advantage to Being a Georgia Subcontractor or Supplier: In typical business situations, two parties contact with each other and, in the event of a breach of the contract, the offended party can only seek restitution from the breaching party.  As an example, let’s assume that ABC Construction, Inc. contracts with XYZ Roofing Corp. for the delivery of roofing tiles.  If the roofing tiles are delivered, but they are not paid for, Georgia contract law clearly allows XYZ Roofing Corp. to seek payment from ABC Construction, Inc.  And, in most business law situations (i.e., in non-construction claims), ABC Construction, Inc. would be XYZ Roofing Corp.’s sole avenue for recovery.

However, Georgia’s materialmen lien law and Federal and state payment bond statutes allow Georgia contractors and materialmen to also seek recovery from additional parties:  In the case of a lien claim, XYZ Roofing Corp can also seek recovery from the owner of the construction project, and in the case of a payment bond claim, XYZ Roofing Corp. can also seek recovery from the surety or insurance company backing the payment bond.

Four Different Types of Payment Bonds in Georgia: The advantage of seeking payment from parties other than those with whom you have a direct contractual relationship come with obligations from the potential payment bond claimant.  Because there are four significant types of payment bonds covering Georgia construction projects, each type of bond has its own distinct differences with differing requirements.

1.    Federal Public Works Bonds Under the Miller Act:  Most Federal projects in Georgia are required to provide payment bonds to protect suppliers and subcontractors.  The Federal statute governing these bonds is commonly referred to as the Miller Act.  Currently, the Federal Miller Act does not require a preliminary notice (e.g., an NTO or a Notice of Furnishing).

2.    Georgia Public Works Bonds Under the Little Miller Act:  Most construction projects owned by the State of Georgia require the general contractor to post a payment bond for the benefit of the project’s materialmen and subcontractors.  The Georgia State Statute governing these bonds and their claims is commonly referred to as Georgia’s Little Miller Act.  It is called this as many of the provisions in the Georgia Little Miller Act mirror the provisions of the Federal Miller Act.  However, there are significant differences which can abridge a subcontractor or supplier’s rights.  Unlike the Federal Miller Act, for example, Georgia’s Little Miller Act requires that those not in privity of contract with the prime contractor or the owner send a Notice to Owner and a Notice to Contractor within 30 days of the first day that the subcontractor or supplier begins working on the job.

3.    Georgia Municipality Public Works Bonds: Although there are many similarities between them, local municipalities in Georgia are governed by a different set of statutes that the State of Georgia’s Little Miller Act.  Nonetheless, most local government projects (e.g., school construction or renovation) are required to maintain a payment bond to protect the project’s contractors and material suppliers.

4.    Private Project Payment Bonds: The three preceding bond statutes require payment bonds on governmental projects.  Although not required by law, many private projects–particularly large projects–are also covered by bonds.  In these situations, potential bond claimants must meet the individual requirements of each bond in order to qualify as a claimant.  In these situations, it is vital to obtain a copy of the payment bond at the project’s beginning and then read and comply with each of its terms and deadlines.

The Payment Bond Terms May Expand Subcontractors Rights: Each of the first three categories of payment bonds in Georgia (Miller Act Bonds, Little Miller Act Bonds, and Municipal Construction Bonds) have minimum requirements established by their respective statutes.  However, the payment bond is also a contract between the governmental entity undertaking the work and its insurer; thus, the contract between them may be more expansive than the minimum requirements of the law.  It is possible, therefore, for a particular payment bond to grant more rights to a claimant, extend the deadlines, or include a class of potential bond claimants which might otherwise be excluded.  Therefore, every contractor and every supplier should review the terms of every payment bond under which they are working.

In the future, we intend to write a series of blog posts highlighting more details of each of the different types of payment bonds in Georgia.  In the meantime, if you are working on or providing materials to any Federal, state or municipal project in Georgia (or a private project with a payment bond) you need to consult with an experienced payment bond attorney who can help you understand your rights, protect and preserve your rights, and, if necessary, enforce your rights.

If you have any questions regarding any type of payment bonds in Georgia, please email us or call the payment bond claim lawyers at the Cobb Law Group toll free at 1-866-960-9539.

Lien Upheld Against Georgia Development Authority Project

Georgia Materialmen Lien and Bond Attorney

by Mark A. Cobb

A recent Georgia Court of Appeals holding may give some subcontractors and suppliers reason to rejoice.  In Pinnacle Props. V, LLC v. Mainline Supply of Atlanta, LLC, 735 S.E.2d 166 (Ga. Ct. App. 2012), the court held that a materialmen’s lien placed against a construction project on a development corporation’s real estate was valid and could be enforced.

Background: Mainline Supply of Atlanta, LLC, a construction material supplier, provided pipes, valves and similar materials for use on a construction project in Cobb County, Georgia.  This project was an office building being constructed by Pinnacle Properties on real estate owned by the Kennesaw Georgia Development Authority.  Originally, the real estate had been owned by Pinnacle Properties, but it was deeded to the Development Authority and leased back to Pinnacle Properties.  After the general contractor failed to pay Mainline Supply for its building materials, Mainline Supply filed a Georgia Mechanics and Materialmen’s Lien against the Pinnacle Properties project and the Kennesaw Development Authority.

The Development Authority’s Argument: Although the materialmen sued the development authority (along with Pinnacle Properties), the trial court found that the documents which the parties had signed transferring ownership of the real estate between them severed the ownership of the land and ownership in the building. Thus, the lower court determined that the local development corporation had no ownership interest in the building, but it held that the development authority held a fee simple interest in the land; conversely, the lower court held that Pinnacle Properties  held a usufruct (a license to use) in the land, but had “title” to the improvements.  Consequently, the Kennesaw Development Corporation was dismissed as a party.

The Material Supplier’s Argument:  It is well established that a materialman’s lien may attach to the interests of a “true owner,” that is, someone who has an estate or property interest in realty; but it will not attach to a usufruct, which does not convey an ownership interest and is not subject to levy and sale.  Thus, while Pinnacle Properties argued that its rights were a mere usufruct and not subject to a lien, the material supplier argued that Pinnacle Properties had title to the building.  Construction lawyers for the material supplier argued that the documents executed between Pinnacle Properties and the development authority severed ownership of the building from ownership of the land.

All of the parties conceded that, typically, any buildings placed upon the land of another–even if they are placed on the property by someone entitled to use the real estate–become part of the realty, and the title to the buildings becomes vested in the owner of the land.  However, the supplier argued, this rule may be altered by agreement, and, by looking at the land-exchange documents, the supplier argued that the parties clearly intended to create a special agreement wherein Pinnacle Properties would have a fee-simple interest in the improvements.

The Georgia Court of Appeals Holding: The Georgia Court of Appeals rejected both Pinnacle’s argument that its interest was a mere usufruct and Mainline Supply’s argument that Pinnacle retained a fee-simple interest in the improvements.  Nonetheless, the Court opined that an estate for years carries with it the right to use the property in as absolute a manner, and an estate for years may be subjected to the lien.  Thus, the Court held that, “Even if Pinnacle does not have title to the building on which the lien is claimed and title is in a third party not subject to the suit, this “will not bar an action for foreclosing the statutory lien of a materialman because if the defendant has any interest in the premises upon which the lien can take effect, that interest is bound. Every legal interest in real and personal property can be seized and sold.  Here, Pinnacle had an estate for years in the leased premises, and a materialman’s lien could attach to and be enforced against such interest, subject to the conditions of the lease.”

Summary:  Even if the building owner did not have title to the building on which the lien was claimed and title was in a third party not subject to the suit, this would not bar an action for foreclosing the statutory lien of a materialman because if the defendant had any interest in the premises upon which the lien can take effect, that interest was bound.

Georgia Claim of Lien Laws:  If you need to file a construction lien anywhere in the state of Georgia, it is vital that it be filed against the proper parties and that all of the deadlines and statutory requirements be met; thus, we encourage you to contact a qualified Georgia Materialmen’s Lien Attorney to help you with your claim of lien.  If you have any questions or have any lien claims or bond claims in Georgia, please feel free to contact us or leave your comments below!

 

CONTRACTORS BEWARE OF RETROACTIVE LIABILITY FOR DESIGN FLAWS

Posted in Contractor Liability,Current Legal Issues,Public Works Projects by Administrator on the June 7th, 2012

by:    Mark A. Cobb

Cobb Law Group

A recent development from the United States Supreme Court may have profound repercussions affecting almost everyone in the design, build and construction industries.

This case stems from the 2007 collapse of the I-35W bridge in Minnesota which killed 13 people.  The bridge, which had been designed by the engineering firm of Sverdrup & Parcel and Associates, Inc., was completed in 1967.  Forty years of use later, the bridge collapsed; although the causes of the bridge’s collapse are still contested, many professionals point to (i) design flaws caused by the original engineers and (ii) Minnesota’s Department of Transportation’s failure to adequately maintain the bridge.

Based upon fairness and foreseeability doctrines, every jurisdiction has a Statute of Repose, Statute of Limitations, Doctrine of Laches or similar concept which limits liability after a certain amount of time.  Perhaps this is an extreme example, but if the Roman Colosseum were to collapse, no one would expect to make the original builders liable.  It’s just been too long!

1964–Minnesota’s Statute of Repose: In 1964, the State of Minnesota enacted a Statute of Repose which limited actions arising from construction projects to ten years.  In other words, the engineers and builders could not be held liable for claims arising from their work after ten years from the completion of the construction.  In our example, the builders of the bridge could not be liable for any claims arising from their work after 1977 (tens years from the bridge’s completion).  In 1980, Minnesota amended its Statute of Repose to extend liability for an additional 5 years; thus, if this amendment were applied retroactively, those designing and constructing the bridge would not have any liability after 1982 (fifteen years from the bridge’s completion).

2008–Minnesota’s Enacts Compensation Statute: After the collapse of the bridge in 2007, Minnesota enacted new legislation in 2008 known as the “compensation statute”.  This legislation allows Minnesota to recoup any payments which the state made to the victims of the collapse from the builders and contractors who worked on the bridge.  Thus, although the state’s Statute of Repose limited the contractors’ liabilities after 15 years, a statute enacted 41 years after the bridge’s completion sought to retroactively impose liability on the engineers and builders!  In fact, the original designers of the bridge (Sverdrup & Parcel and Associates, Inc.) is no longer intact and has become a part of Jacobs Engineering Group, Inc.

2012–Impact on Contractors: So what has been happening since the enactment of the 2008 statute?  It has been in litigation.  At the state level, Jacobs Engineering (the successor entity to the bridge’s original design group) has been arguing the unconstitutionality of the 2008 legislation.  As the case has worked its way through the state court system, the new compensation statute has been upheld by the Minnesota courts.  Finally, after the statute was upheld by the Minnesota Supreme Court, Jacobs Engineering filed a writ of certiorari to the United State’s Supreme Court which asked the high court to review the 2008 legislation and its applicability to construction work completed in 1967 (Jacobs Engineering Group Inc., v. State of Minnesota).  Last week, the Supreme Court denied Jacobs Engineering’s request and refused to hear the case.

The impact of this case has wide implications involving contractor liability, retroactive legislation, inability to assess risks; not only that, it opens the field for other states to re-establish liability on construction professionals long after fairness–or even state statute!–allows.

This is a general information article and should not be construed as legal advice or a legal opinion. The content above has been edited for conciseness and additional relevant points are omitted for space constraints. Readers are encouraged to seek counsel from a construction lawyer for advice on a particular circumstance.

Payment Bond Claims on Privately Owned Construction Projects in Georgia

Posted in Materilamen's Liens,Payment Bonds,Public Works Projects by Administrator on the May 17th, 2012

You probably know that payments bonds are a great way to increase the likelihood of getting paid for the work you perform or the materials you supply on Federal, state and local government projects in Georgia.  But, did you know that private construction projects can also have payment bonds?

Public Works Projects and Payment Bonds: Since public policy prohibits a supplier or a subcontractor from filing and foreclosing a claim of lien against a public project, the federal and state governments have established a bonding procedure to protect the interests of construction professionals who are not paid for their work and supplies.  All construction contracts in excess of $100,000 for any public works located in Georgia (this includes Federal public works projects as well as State of Georgia and local municipality public works projects) must be covered by a payment bond.  Payment bonds may also be issued for smaller public works projects.  Because these federal, state and local construction projects are governed by statutes, payment bond claims against government projects are (largely) governed by statutes.  Federal projects, for example, are governed by The Miller Act.  The State of Georgia has enacted two separate code sections relating to payment bonds: one covers construction projects owned by the State of Georgia, and one covers construction projects owned by counties and local municipalities in Georgia (collectively, these are referred to as the Little Miller Act because it mirrors its federal counterpart).  For more information, on public works payment bonds, please click here.

Private Construction Projects and Payment Bonds: Government public works projects require payment bonds by statute, but there is no requirement that privately-owned construction projects must be covered by a payment bond.  Nonetheless, an owner or a general contractor may also include a payment bond.  If so, that is probably great news for any sub-contractor or supplier working in Georgia!  However, since payment bonds are not required by statute, they are not as regulated by statute as the public works payment bonds.  Instead, they tend to be governed by contract; specifically, they are governed by the contract between the surety (the insurance company providing the payment bond, the obligee (the person requiring the bond), and the obligor (the person performing the construction contract).  What does this mean?  It means you should obtain a copy of the payment bond as soon as possible and read it!  It will set out the method(s) of making a claim as well as the deadlines.

Payment Bonds and Mechanics and Materialmen’s Liens on Private Projects: Even if the private project on which you are working or supplying materials in Georgia is covered by a payment bond, then you are still allowed to file a claim of lien if you are not paid.  This is a boon to sub-contractors and suppliers as it gives them multiple options for collecting the money they are owed.

Needless to say, payment bond claims on public works projects, payment bonds claims on private projects, and mechanics and materialmen’s lien claims each have their own requirements and deadlines.  If you have provided labor or materials on a project but you haven’t received payment, please contact a construction lawyer in Georgia who can assess your claim and help you navigate the requirements and meet the deadlines to file your payment bond claim and construction liens.

This is a general information article on Georgia construction law and should not be construed as legal advice or a legal opinion. The content above has been edited for conciseness and additional relevant points are omitted for space constraints. Readers are encouraged to seek counsel from a construction lawyer for advice on a particular circumstance.

Payment Bond Claims on Public Works Projects in Georgia

Posted in Government Contracting,Payment Bonds,Public Works Projects by Administrator on the May 10th, 2012

Payment Bond Claims in GeorgiaThe pundits continue to debate the state of the economy, but since we represent so many construction professionals, we are able to notice trends pretty quickly ourselves.  To no one’s surprise, government contracting work has increased, and this has given much-needed work to subcontractors, and suppliers in Georgia.  Many clients who had stayed away from public works projects have since embraced them.

Unfortunately, we have noticed that government contract jobs in Georgia have been “slow pay”.  What does that mean for those working and supplying on government jobs?  Practically speaking, it means that our clients’ cash flow is interrupted–usually for no reason.  It also means that they are having to enforce their payment bond claim rights in Georgia.

Almost every day, we receive a telephone call from a specialty subcontractor or a supplier who is not getting paid for their work and materials on a government project.  Fortunately, if a payment bond claim is timely filed, then their likelihood of recovery is very good.  Here are some important points to keep in mind if you are working on a government project.

  • Know Whether the Project Owner is a Governmental Entity: Be very careful to identify the owner of the public works project on which you are working.  Some projects may look like they are owned by the Federal, state or local government, but, in fact, they are owned by a private entity.  Public or military housing projects can be owned by a private corporate and then leased back to the government.  Determining the owner helps determine which set of requirements apply in your particular situation.  Development Authorities, Housing Authorities, and similar “government” organization can blur the distinction between owners.  (Remember, just because there is a payment bond covering the project does not mean that it is a government project–payment bonds may be found on private projects too!)
  • Know the Government Entity Layer: If you know that your project is a government contract, then you must determine for which governmental layer the project belongs.  Generally speaking, your government project may be Federal, State of Georgia, or a local municipality (such as a county or city government).  Each of these three layers of government are covered by their own statutes and requirements for payment bond enforcement.  All Federal projects are covered by The Miller Act; all State of Georgia projects are coverer by The Little Miller Act so it is vital to apply the proper rules to your slow-pay issue.
  • Meet the Deadline for Filing a Payment Bond Claim in Georgia: Typically, you must file a claim within 90 days of the last day in which you worked on the governmental project.
  • Get a copy of the Payment Bond: The surety issuing the payment bond covering your project will have certain requirements and can help identify owners, general contractors and addresses.  Some general contractors make obtaining copies of the payment bond available, some do not.
  • Make Sure that You Sent A Notice to Owner/Notice to Contractor: If you are a third tier supplier or subcontractor then you must send a Georgia Notice to Owner (“NTO”) and a Georgia Notice to Contractor (“NTC”) on all projects owned by the State of Georgia or any local municipality.  These NTO’s and NTC’s must be sent within thirty days of the first day in which you began working on the government project or you began supplying on the government project.  If you fail to do this, you may be prohibited from filing a claim against the payment bond.

If you have any questions about contractor rights or suppliers’ rights regarding government bond claims on projects located anywhere in Georgia, please contact us.

 

This is a general information article and should not be construed as legal advice or a legal opinion. The content above has been edited for conciseness and additional relevant points are omitted for space constraints. Readers are encouraged to seek counsel from a construction lawyer for advice on a particular circumstance.